Fed Mails It In

I think everyone pretty much knew what the Fed would do today.  They would keep interest rates at 0%-0.25% and say they were likely to stay there for an extended period of time.  They would keep their agency and treasury purchases the same.  And in the statement they would slightly upgrade the status of the economy.  And that’s exactly what they did.

Economic activity is now “levelling out” as opposed to “the pace of economic contraction is slowing” (June 24).  The $300 billion in treasury purchases will be completed by the end of October as opposed to by autumn as the Fed eases into the end of its treasury purchases.

This is pretty much a non-event.  The slight nuances in the statement and policy suggest cautious optimism on the part of the Fed that the recession is ending and the economy turning for the better.  But the emphasis is on caution for now.  They want to keep all their policy stimulus in place and see a lot more confirmation of improvement before tightening monetary policy. 

Interesting how Fed sentiment is pretty much a perfect reflection of market sentiment, isn’t it????  Why do I get the feeling the Fed wants to tell the market exactly what it wants to hear?????